KLM Royal Dutch Airlines
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- KLM Royal Dutch Airlines
P.O. Box 7700
1117 ZL Schiphol
- Main hub
- Amsterdam Schiphol Airport
- Business model
- Full Service Carrier
- Domestic | International
- Airline Group
- Part of Air France-KLM S.A.
- Joined Alliance
- Association Membership
- Codeshare Partners
- Aer Lingus
Air Europa Lineas Aereas
China Eastern Airlines
China Southern Airlines
Comair (South Africa)
CSA Czech Airlines
Delta Air Lines
Ukraine International Airlines
Established in 1920, KLM Royal Dutch Airlines is the national carrier of the Netherlands. KLM operates an extensive network which includes services within Europe and to Asia, Africa, North America, Central and South America and the Middle East. The carrier also operates freight services, and handles all service operations from its hub at Amsterdam Schiphol Airport. KLM is a founding member of the SkyTeam alliance, and is part of Air France-KLM S.A.
Location of KLM Royal Dutch Airlines main hub (Amsterdam Schiphol Airport)
2,786 total articles
233 total articles
This is Part 2 of a report reviewing European airline comments filed in the US-Gulf airline dispute. This instalment examines AF-KLM and Lufthansa's supposed claims of damage from Gulf carriers: a long list of statistics about market share and closed destinations. Some imagination has been applied here. For example Lufthansa attributes its 1995 exit from the Sydney route on Gulf carriers- despite the first Gulf carrier not arriving in Australia until 1996; Lufthansa and Swiss cite closed destinations ranging from Busan to Monastir despite their not having service from the Gulf airlnes.
AF-KLM notes Gulf carriers have gained market share in Europe, but AF-KLM fails to note its own internal cost challenges, along with the impact of LCCs, that have seen it decline in parts of the world while IAG and Lufthansa grow. AF-KLM argues it suffered damage from two fewer Bangkok frequencies – despite KLM's up-gauging which produced 12% growth for the group. Lufthansa says "there is no evidence that the Gulf carriers meaningfully stimulate market growth". But Western European visitors to Bangkok are up 9.6% partially due to Gulf carriers, which are also stimulating growth from Africa and the Middle East.
US-Gulf airline dispute - Europe Part 1: IAG opposes "subsidy" of US airlines, AF-KLM on 5th freedom
Of the thousands of comments the US government has received about the US-Gulf carrier debate, those from Air France-KLM, Lufthansa and International Consolidated Airlines Group stand out. They are the JV immunised partners of US carriers, and while this may suggest shared interests, the three European carriers show nuances – and even contradictions – compared with the positions of their respective US partners.
Part 1 of this report examines two aspects: Air France-KLM boldly believes the US-Gulf dispute should embrace Europe since US-Gulf traffic has the potential alternative of hubbing over Europe. Further, AF-KLM fears greater Gulf fifth freedom trans-Atlantic flying.
By AF-KLM's logic, IAG should have an even greater say: IAG is the single largest group operating between the US and Western Europe with a 16% capacity share, more than Lufthansa Group's 13%, AF-KLM's 9% or Delta's 14%. Yet IAG denounces the US carrier White Paper, saying: "To shield US airlines from their competitors would be to grant them the biggest subsidy of all."
Delta Air Lines and Virgin Atlantic continue to steadily grow their trans-Atlantic joint venture with the expansion of markets outside the more competitive routes of London Heathrow to New York and Los Angeles. With the feed both airlines bring to the partnership, routes that would be unviable on a standalone basis are becoming promising.
The latest addition is a new service from Delta’s smaller Salt Lake City hub to London Heathrow to be launched during the summer travel season in 2016. Delta is also launching new service from JFK to Edinburgh in conjunction with Virgin Atlantic during that time, resulting in new competition to American Airlines.
Delta and Virgin Atlantic have quickly leveraged Virgin’s strong position at Heathrow to create an expansive trans-Atlantic network between the US and London, enabling the two carriers to close the gap with market leaders American and British Airways. At a bit more than a year and a half old, the joint venture is still in its early stages. But the rapid network changes initiated by Delta and Virgin Atlantic show the airlines are working to quickly spool up to the desired level of maturity for their tie-up.
All is not well in Air France-KLM. The group has reported another decline in quarterly profits. Its 2Q2015 operating result was down by 2% and insufficient to bring 1H2014 into positive territory after an operating loss in 1Q2015. Currency movements, specifically the weaker EUR versus USD, had the effect of inflating both revenue and costs, but the net impact accounted for the deterioration in the operating result.
Nevertheless, this should not detract from Air France-KLM's very weak unit revenues, which appear immune to attempts at improving the product and may only respond to capacity cuts. Either way, unit cost reduction will remain crucial if the group is to return to a sustainable profit path. Long haul routes in particular are under threat.
The development of its medium haul low cost airline, Transavia, continues to be rapid in France, but the scale and profitability of this operation are weak compared with Europe's leading LCCs. However, the establishment of Transavia Europe, with bases beyond France and the Netherlands, could be back on the agenda after a change in leadership at the French pilot union.
Air France-KLM's 6M2015 passenger traffic figures indicate RPK growth of just 0.7% for the group, compared with 5.8% for IAG and 3.6% for the Lufthansa Group. With a passenger load factor of 84.2% for the period, Air France-KLM is filling more of its seats than IAG (79.3%) and the Lufthansa Group (78.3%). Its capacity discipline is welcome, but has been forced on it by successive losses.
Moreover, its poor financial track record highlights the challenges faced by Air France-KLM in making a profit from these seats - and cost cutting remains a priority. Key to this is labour productivity improvement. A recent agreement signed by KLM pilots is a positive step in this regard, by contrast with ongoing deadlock between Air France and its pilot union.
In this report, we consider Air France-KLM's main strengths, weaknesses, opportunities and threats.
We suggest that Air France-KLM should be more positive in developing commercial relationships with Etihad and Chinese partner airlines and more aggressive with the growth of its LCC subsidiary Transavia (if pilots allow it).
Aviation in Europe has a PR problem, which is not helped by the fragmentation of industry representation. Efforts to consolidate representation have so far not yielded material results. Europe's five largest airlines are now attempting to seek common ground, prompted by the European Commission's consultation on a new aviation policy. However, they are avoiding obvious sticking points such as protectionism with regard to competition from Gulf-based airlines. By contrast, airport representation is unified in ACI Europe, which has also responded to the Commission with a liberal set of policy proposals.
Recent changes in the membership of Europe's main airline representative bodies have seen ELFAA become its biggest airline association, measured by its members' passenger numbers, ending the previous hegemony of AEA. IAG's legacy airlines defected from AEA to ELFAA due to differences of opinion over market liberalisation.
There has never been a greater need for a single voice on issues such as taxation and the infrastructure provision (both on the ground and in the air). Aviation needs to argue its case and more effectively promote its benefits to the public.